Will Post-Retirement Income Affect Your Social Security?
The short answer is: No. The longer answer is: Wow, trying to explain the finer points of how Social Security works is very difficult.
When people plan for retirement, part of those plans involves their Social Security benefits. Many look forward to being able to retire and be able to live off their savings, plus their monthly government check.
Still, what happens if you keep working after you retire? Will that income get deducted from your Social Security check? Is it possible that your little side hustle could mean getting less money than you are entitled to receive?
Luckily, no. While income earned during a certain set of your golden years might temporarily affect how much you receive in your monthly check, there is no long-term downside. Government benefits aren’t always the simplest topic, so let us explain …
Social Security eligibility vs full retirement age.
There’s no bureaucracy like a government bureaucracy cuz a government bureaucracy … has decades, if not centuries, of institutional inertia. So when it comes to claiming your Social Security benefits—after a lifetime of paying into the system—there are some things you’re going to have to take into consideration.
First, the age at which a person can start claiming Social Security benefits is 62, but that is different than the designated “full retirement age.” It’s confusing, we know. And it gets more complicated from here.
The full retirement age for people born between 1943 and 1954 is 66. Starting with people born in 1955, two months is added to the full retirement age every year until it reaches 67 for people born in 1960 or later.
Before you reach full retirement age, income will affect your benefits.
Between the age of 62 and the age at which you reach full retirement, the amount you earn can affect your Social Security benefits.
In years where you are under the full retirement age, you deduct one dollar for every two dollars that you earn above the annual limit ($17,040 for the year 2018). And in the year when you finally reach full retirement age, you deduct $1 for every $3 you earn over an entirely different annual limit ($45,360 for the year 2018.)
Oh, but during that final year, they only count income that you made in the months before you hit full retirement age.
Working after age 62 doesn’t mean a smaller benefit overall.
Is your brain bleeding yet after reading all that? Don’t worry, our brains are bleeding, too. We can’t actually tell you how much you will end up receiving in Social Security benefits, because the amount that you are eligible to receive will depend on when you were born and how much you have earned.
However, here is the good news! Having dollars deducted from your benefits between age 62 and your full retirement age does not mean losing out on your total Social Security benefits.
From the SSA’s website:
Also, as long as you continue to work and receive benefits, we will check your record every year to see whether the additional earnings will increase your monthly benefit. If there is an increase, we will send you a letter telling you of your new benefit amount.
In addition, after you reach full retirement age, we will recalculate your benefit amount to give you credit for any months in which you did not receive a benefit because of your earnings. We will send you a letter telling you about any increase in your benefit amount.
So if you’re concerned about additional work cheating you out of your hard-earned government benefits, never fear! The SSA has got you covered, and any amount that you don’t receive now will be made up for later.
What you can do to save for retirement.
If you are counting on Social Security benefits to support you in retirement, think again. The amount disbursed likely won’t come close to covering your living expenses.
And if you have additional debts you still owe, then things could get hairy and fast. In fact, we recently wrote about how a bankruptcy crisis is threatening America’s seniors—the result of a social safety net that’s mostly been shredded into little bits.
So if you want your “golden years” to really be golden, you’re going to have to save for retirement yourself. Here are three tips to make sure that you don’t have to keep working until the day you die:
- Invest money for the long-term. If your employer offers matching funds for a 401(k), then take advantage of them. If they don’t, then you’re probably better off putting money into an individual investment account or IRA. Investing in stocks is also an option but is one that can easily lead to your savings evaporating because of a few bad bets. Stay conservative with your investments, but do put as much money as you can towards long-term savings. The earlier you start the better.
- Stick to a budget. How else are you going to find all that money to put towards your investments? Sticking to a strict budget is the only way you’re going to make your money work for you, not the other way around. If you’re having trouble finding places to cut, try to adopt the “pay yourself first” method, where you start with the money you’re setting aside and then build the rest of the budget from there. We bet you’ll be pleasantly surprised at the results.
- Save for the short-term, too. If you’re only putting money towards retirement, then you are leaving yourself exposed to short-term financial trouble. Without some handy, easily accessible funds, what are you going to do when you have surprise car repair or an unexpected medical expense? This is how people up relying on bad credit loans and no credit check loans to make ends meet. For situations like these, you need to have an emergency fund. Start with $1,000 but build it as big as you can.
Planning for your financial future, whether that’s for your retirement or just an unexpected bill, is the best way to steer clear of predatory payday loans and cash advances. (And if you have to take out a bad credit personal loan, maybe check out an installment loan instead.) To learn more about long-term financial planning, check out these related posts and articles from OppLoans:
- Good Personal Finance for the Long-Term
- From Budget to Baller: 6 Tips to Grow Your Money
- Financial Priorities: Which Debts Should You Pay Off First?
- 8 Ways To Save Money Today, Tomorrow and Every Day After